Oil drops on concerns of a recession

Oil drops on concerns of a recession

Brent crude was under $1.92, or 1.8%, to $105.59 a barrel at 1202 GMT. WTI crude dropped $1.79, or 1.7%, to $103.92 per barrel.

This week, oil prices are under pressure, along with global financial markets, amid jitters over increasing interest rates, the most substantial U.S. dollar in two decades, and worries over inflation and possible recession.

Prolonged coronavirus lockdowns in the world’s top crude importer, China, have also affected the market.

 

U.S. headline CPI for the 12 months to April bounced 8.3%, fueling concerns regarding more significant interest rate hikes and their influence on economic growth.

The Organization of the Petroleum Exporting Countries (OPEC)cut its prediction for growth in world oil demand in 2022 for a second straight month, quoting the influence of Russia’s invasion of Ukraine, increasing inflation, and the resurrection of the Omicron COVID-19 variant in China.

An uncertain European Union bans on oil from Russia, a key EU supplier of crude and fuels could further shrink global supplies.

The EU is still haggling over the elements of the Russian embargo. The vote needs unanimous approval, but it has been delayed as Hungary opposes the ban because it would be too disruptive to its economy.

 

Worries limit prices increases

On Wednesday, oil prices bounced 5% after Russia sanctioned 31 companies based in countries that set sanctions on Moscow following the Ukraine invasion.

That created anxiety in the market when Russian natural gas flows to Europe via Ukraine dropped by a quarter. It was the first time exports via Ukraine have been disrupted since the invasion.

Price gains have been capped by concerns about demand destruction in China as it attempts to curb the spread of the COVID-19.

In the United States, commercial crude inventories increased last week because of a record release of oil from the U.S. strategic reserves. Nevertheless, gasoline stockpiles declined ahead of the peak summer driving demand season, the Energy Information Administration said Wednesday.